The Great A&P and the Struggle for Small Business in America
The first everyday-low-price chain, and the political backlash it drew.
Summary
Levinson tells the history of the Great Atlantic and Pacific Tea Company, which became the largest retailer in the world and at its peak sold more groceries than any company on earth, and uses it to examine the American political fight over chain stores. The Hartford brothers built A&P by removing every cost between producer and consumer: they bought direct, manufactured their own products, ran cash-and-carry economy stores with almost no service, and accepted margins a fraction of what independent grocers needed.
The political half is the more original contribution. Levinson documents the anti-chain movement of the 1920s and 1930s, the state chain store taxes, the Robinson-Patman Act which made it illegal to give volume discounts that could not be cost-justified, and the federal antitrust prosecution of A&P which effectively punished the company for charging low prices. He shows that the political case against A&P was made on behalf of independent wholesalers and retailers rather than consumers, and that the legislation succeeded in slowing the productivity gains that chain distribution produced.
For investors and operators the book is a study of how a low-cost operating model works, what it requires in vertical integration and volume commitment, and how it eventually loses. A&P declined because it failed to move to supermarkets fast enough, could not adapt to suburbanisation, and had a management succession that preserved the old model. Levinson writes as an economic historian and his sympathies are with the efficiency argument, which some reviewers found tilts the treatment of the small-business case.
Key takeaways 7
- A&P built its advantage by eliminating wholesalers and manufacturing its own goods, which let it operate on gross margins competitors could not survive.
- The economy store format succeeded by removing credit, delivery and service, which were the costs that made independent grocers expensive.
- American antitrust law was used in the 1930s and 1940s to punish low prices, because the political constituency was independent retailers rather than consumers.
- The Robinson-Patman Act was written specifically to prevent chains from obtaining volume discounts, and it raised consumer prices as intended.
- Vertical integration into manufacturing gave A&P a cost floor its competitors could not match and a fixed asset base that later slowed its adaptation.
- A&P declined because it delayed the shift to the supermarket format and to suburban locations, not because of competition on price.
- Retail productivity gains come from changing the distribution structure rather than from operating the existing structure better.
Who should read it
Retail and consumer operators studying low-cost operating models, and anyone interested in how competition policy has treated scale distributors.
Who recommended it 1 · 1 direct
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